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Venture Capital [For Bank Exams]

Venture Capital is a
source of funds that used to finance new proposal or ideas involving new
technology pr products which are risky but with a potential of high returns. It
is a capital committed in the form of share-holding for the information and
setting up of a firm, specializing in new ideas or

technologies. In other
words, it is a long term fund in equity or semi-equity form to finance high
tech projects involving high risks and yet having strong potential of high
profitability.

In India, the venture
capital has largely been sponsored by financial institutions.

Advantages:

It benefits the
investors when they are invited to invest only after organization starts
earning profit, when risk is low and growth is healthy.

It makes contribution
on technological innovations and promotion of entrepreneurship.

It helps the
industrialization, technological development, generate employment and help
develop entrepreneurial skills.

Kinds of Venture Capital:

Equity Capital - TheEquity
Capitalrefers to that
portion of the house’s capital, which is raised in exchange for the share of
ownership in the company.

Risk Capital – It representing financial investment in a highly risky
proposition in the hope of earning high rate of return.

Start-up Capital - Startup capital
refers to the money that is required to start a new business, whether for
office space, licenses, permits, product development and manufacturing, inventory,
marketing or any other expense.